The Flint Water Disaster Shows Why We Need Markets

Jonathan Newman

Many moons ago, I wrote a piece for mises.org introducing Westley’s Law, which was my theory for government growth based on its being held to lower expectations, relative to the market. It struck a nerve, of sorts. Many emailed me to say the idea required expansion into a book.

If I ever produce one, I’ll write up a section on the Flint water crisis, which is a classic case of the Law applied to the resource most central to man’s survival. For decades, Flint’s water consumers looked the other way while its politically-protected, socialist water utility overcharged and then flubbed delivery of water to Flint’s residents. (I am wary of calling them consumers because that term implies the ability to opt out.) 

This incompetence lead to a series of reforms that were actually deforms. Chief among them was the decision to make the Flint River the utility’s primary water source in 2014, involving the use of faulty piping. The result: contaminated water, elevated lead levels in the water supply, sickness, and death. 

The United States’ public broadcasting service aired a documentary about the crisis last month with the predictable conclusion that it wasn’t Flint’s socialist organization of its water system that was the problem, but that some bad, incompetent people led it. This is the go-to explanation for any government failure. It’s like arguing the Soviet Union failed simply because of its dearth of Public Administration graduate programs. 

Economists think differently, and in the case of Flint, note what can happen when producers are not motivated by profit, causing them to focus on factors other than consumer satisfaction. Since government provision of goods necessarily operates outside of the profit system, individuals operating in the public sector must be motivated by other factors, such as the maximization of power, benefits, and budgets. The real scandal in Flint was that its water system placed actual water consumers far down its list of priorities, which makes sense given that (i) its funding depended more on satisfying state and federal regulators and (ii) its culture rewarded job security and fat payrolls.

Yoda might say, “Hardly new ideas, these.” At least, not to Austrians. Mises noted in Human Action,

Bureaucratic conduct of affairs is conduct bound to comply with detailed rules and regulations fixed by the authority of a superior body. It is the only alternative to profit management. … Whenever the operation of a system is not directed by the profit motive, it must be directed by bureaucratic rules.

The rules then become ends in themselves. In contrast, Rothbard wrote (in his 1961 essay, “The Fallacy of the ‘Public Sector’”),

The productivity of the private sector does not stem from the fact that people are rushing around doing “something,” anything, with their resources; it consists in the fact that they are using these resources to satisfy the needs and desires of the consumers. Businessmen and other producers direct their energies, on the free market, to producing those products that will be most rewarded by the consumers, and the sale of these products may therefore roughly “measure” the importance that the consumers place upon them.

Such statements emphasize the vital importance of the private provision of things that matter, and the risks of relying on public provision. No one cares about shortcomings in the public provision of, say, state road maps or space travel, because hardly anyone uses them. But when it comes to mail delivery, defense, basic property protection, education, health care, and water, the persistent sense of crisis exists due to the obvious if unacknowledged lack of consumer sovereignty. 

Which is why the Flint water crisis matters, because it calls into question the public provision of anything. This is why the feds had to get involved, pump millions of dollars in coerced capital into the region, finance public broadcasting documentaries, and make it go away. Unfortunately for Flint water dependents, the institutional structure remains. 

The horror of it all is that the same structure exists at most of the water systems in the United States. Which brings me back to Westley’s Law.

It exists largely because those operating the structure are held to lower standards than what we observe in the market. Water boards and water provision become ends in themselves, with the implicit understanding that there are few alternatives to dissatisfied consumers.

Yet, one can easily imagine a competitive market for water that could replace the now dominant socialized system. Why don’t water firms compete for consumers while maintaining and investing in a shared infrastructure that delivers water to homes and businesses? This is essentially the system that emerged in telephony in the 1980s, and the changes unleashed in innovation, delivery, prices, and output continue to astound. 

They astound so much, in fact, they apparently must never, ever be applied to other utilities, including water. 

But there is hope. Last week, five individuals — including Michigan’s director of human and health services — were charged with involuntary manslaughter for failing to alert the public about the outbreak of Legionnaires’ disease linked to Flint’s contaminated water. Holding public officials criminally accountable for nefarious outcomes is crucial to stem the growth of government in general. 

Why not? If Volkswagen can be fined billions of dollars for intentional (albeit miniscule) emissions violations, if Wells Fargo can be fined in the hundreds of millions for padding its bottom line with fraudulent accounts, if two prominent Fox News figureheads lose their jobs and are fined millions following sexual harassment allegations, if Mylan should pay $465 million to settle allegations that it misclassified Epipen treatments, if Samsung should pay a steep price for faulty batteries in one of its popular phones (causing them to explode) — all serious events in which not a soul was killed — then why can’t public officials in Michigan be held responsible for the effects of a poisoned water supply for which they were responsible?

The fact that officials are not held to similar standards as those in the private sector is why government grows. Perhaps the Michigan arrests will spur others. Lord knows, when it comes to government malfeasance and unaccountability, Flint, Michigan, is a small tip of the iceberg.

Christopher Westley teaches economics at Florida Gulf Coast University.

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